After that I will convert it into a rental property.

If you have reported that as an investment on your tax return then you can still move in but you are converting a property from investment to your primary residence. 

That way there is no question about who owns the flooring when they eventually decide to leave.

Thankfully I eventually learned about wealth (Thanks, Kiyosaki) and started to set (and achieve) some bigger financial goals.

After listening to BP for a while, I'm trying to start out my financial journey with house hacking and eventually grow my real estate portfolio!

Gross rent is $1750 for all three units, and it has an unfinished basement that is plumbed and can eventually be converted to a fourth unit.

The 2nd set is a sublease and optioning the option to buy.The SOL is better because it makes you money where as the straight LO just costs you money.The money is made in the spreads between:1 - The cost of rent to you and the what you then rent that property to someone else for.2 - The same with the Option Fee3 - The same with (eventually) the option prices to buy.

On Thursday (the day before New Years Eve), they told us they realized it was a house converted into units and said that while they will finance to us, they won't finance to us on that property.

This would give me the opportunity to eventually rent this house out and buy a new primary residence using my VA loan (I would not have enough to use my VA loan entitlement for two homes).

HML are big on reliable investors with good track records, so as you do more deals and build your track record (preferably with the same ones), you might eventually be able to get close to 100% financing.